Nigeria’s Presidential Fiscal Policy and Tax Reforms Committee has faulted key aspects of a recent publication by KPMG on the country’s newly enacted tax laws, saying the analysis was largely premised on misinterpretation of policy intent and mischaracterisation of deliberate reforms.
Chairman of the Committee, Taiwo Oyedele, in a detailed response titled “Response to KPMG: Observations on Nigeria’s New Tax Laws,” said while some issues raised by the consulting firm were useful—particularly on implementation risks and clerical or cross-referencing matters—the bulk of the commentary failed to situate the reforms within their wider fiscal and economic objectives.
Oyedele said several matters described by KPMG as “errors,” “gaps” or “omissions” stemmed from incorrect conclusions, incomplete understanding of the reforms, missed policy context or a preference for alternative outcomes rather than defects in the law. He stressed that disagreement with policy direction should not be framed as technical error, noting that other professional firms engaged more constructively by seeking clarification from policymakers.
He emphasised that the new tax laws contain deliberate policy choices designed to achieve defined reform goals and should be distinguished from recommendations that merely reflect the preferences of external advisers.
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Addressing concerns about the taxation of shares and the stock market, Oyedele dismissed claims that the new chargeable gains provisions could trigger a sell-off. He clarified that the tax on gains from shares is not a flat 30 per cent but ranges from zero to a maximum of 30 per cent, with a planned reduction to 25 per cent.
He added that about 99 per cent of investors qualify for unconditional exemption, while others are eligible subject to reinvestment. According to him, the stock market is at an all-time high with increased investment flows, indicating that investors understand the reforms strengthen company fundamentals, profitability and cash flows.
On the commencement date of the new laws, Oyedele said calls to align implementation strictly with the start of an accounting period failed to appreciate the complexity of a wholesale tax reform. He explained that the changes span multiple assessment bases, audit timelines, deductions, credits and penalties, making a single accounting-date anchor impractical without creating unresolved transition issues.
He also defended provisions on indirect transfer of shares, describing them as consistent with global best practice and international efforts to curb base erosion and profit shifting. The objective, he said, was to close a long-standing loophole exploited by multinationals, not to undermine competitiveness, dismissing claims of economic instability as misleading.
On value added tax (VAT), Oyedele said calls for an explicit exemption on insurance premiums were unnecessary, noting that insurance premiums do not constitute a taxable supply under Nigerian law. “Insurance is about risk transfer, not the supply of goods or services subject to VAT. This has always been the legal and administrative position,” he said.
Responding to concerns over the inclusion of “community” in the definition of a taxable person, Oyedele said the drafting approach aligns with modern legislative principles. He explained that statutory definitions apply wherever the term is used unless the context dictates otherwise, helping to streamline provisions and avoid repetition.
He defended the composition of the Joint Revenue Board, saying its revenue-focused membership was intentional to reflect subnational tax perspectives that complement the fiscal policy role of the Ministry of Finance. He noted that the structure mirrors the former Joint Tax Board, which functioned effectively.
Clarifying dividend taxation, Oyedele said KPMG appeared to conflate foreign-controlled companies with foreign operations of Nigerian firms. He explained that dividends from foreign companies cannot be franked because no Nigerian withholding tax is deducted, and that differing treatment reflects a deliberate and logical policy distinction.
On non-resident taxation, he said the assumption that final withholding tax removes the obligation to register or file returns ignored the broader purpose of tax administration. He noted that filing requirements apply even where tax has been finally deducted, as returns serve compliance and information needs beyond revenue collection.
Oyedele criticised proposals he said would undermine core reform objectives, rejecting suggestions to exempt foreign insurance companies from tax on premiums written in Nigeria, warning that such a move would disadvantage local insurers. He also defended the disallowance of deductions for foreign exchange sourced from the parallel market at rates above the official window, describing it as a fiscal measure aligned with monetary policy to discourage round-tripping and support naira stability.
He further explained that linking deductibility of expenses to VAT compliance is an anti-avoidance measure aimed at ending advantages previously enjoyed by businesses patronising VAT-evading suppliers. According to him, the rule promotes fairness and voluntary compliance, especially with provisions that allow self-charging of VAT.
On personal income tax, Oyedele said criticism of the 25 per cent top marginal rate ignored reliefs such as pension contributions that significantly lower effective tax rates for high earners. He said the rate compares favourably with those in several African countries and advanced economies, balancing fairness with competitiveness.
He added that the combination of higher rates for top earners and lower corporate tax is designed to ease the tax burden associated with business formalisation.
Oyedele also pointed out factual errors in KPMG’s analysis, including references to the Police Trust Fund, which he said expired in June 2025 after completing its six-year statutory lifespan. He noted that concerns about small company tax exemptions affecting larger firms predated the new laws, as the thresholds were introduced under the Finance Act 2021.
He said the publication failed to acknowledge major structural improvements introduced by the reforms, including tax simplification and harmonisation, the planned reduction of corporate tax to 25 per cent, expanded input VAT credits, exemptions for low-income earners and small businesses, removal of minimum tax on turnover and capital, and stronger incentives for priority sectors.
Oyedele said the reforms emerged from extensive consultations and a transparent legislative process that included public hearings and opportunities for professional input. While acknowledging that clerical inconsistencies can arise in comprehensive overhauls, he said such issues were already being addressed.
“The success of the new tax laws now depends largely on administrative guidance, clarifications from the tax authority and supporting regulations, pending future amendments,” he said, urging stakeholders to move beyond static critique and adopt a collaborative approach to support effective implementation and Nigeria’s drive for a self-sustaining, competitive economy.
